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that the bank will not be protected, unless it has been misled by the apparent ownership and has thereby been prejudiced.194 The bank may apply a deposit against a debt of the equitable owner, although the deposit stands in the name of another person.*

195

A bank may not apply a deposit to the debt of a firm of which the depositor is a member.196 Nor can it charge the individual note of a partner to the account of the firm.197 It

fully used it as collateral security. The money borrowed thereon was in the form of a check, which the firm deposited to its credit in defendant bank. The firm was also indebted to defendant, which was authorized to apply to the payment of the indebtedness any moneys on deposit to the credit of the firm. Held that, as against plaintiff, defendant had the right to apply the moneys collected on the check to the firm's indebtedness, even after the firm had assigned. Hatch v. Fourth Nat. Bank, 147 N. Y. 184, 41 N. E. 403. See "Banks and Banking," Dec. Dig. (Key No.) § 134; Cent. Dig. §§ 353-374.

194 Burtnett v. First Nat. Bank of Corunna, 38 Mich. 630; Douglas v. First Nat. Bank of Hastings, 17 Minn. 35 (Gil. 18); Cady v. South Omaha Nat. Bank, 46 Neb. 756, 65 N. W. 906; Id., 49 Neb. 125, 68 N. W. 358; Davis v. Panhandle Nat. Bank (Tex. Civ. App.) 29 S. W. 926. See Shawnee Nat. Bank v. Wooten & Potts, 24 Okl. 425, 103 Pac. 714. Cf. Forbes v. First Nat. Bank of Enid, 21 Okl. 206, 95 Pac. 785. See "Banks and Banking," Dec. Dig. (Key No.) 134; Cent. Dig. §§ 353-374.

195 Camden Nat. Bank v. Green, 45 N. J. Eq. 546, 17 Atl. 689; Green v. Camden Nat. Bank, 46 N. J. Eq. 607, 22 Atl. 56. Contra: Citizens' Nat. Bank v. Alexander, 120 Pa. 476, 14 Atl. 402. See "Banks and Banking," Dec. Dig. (Key No.) § 134; Cent. Dig. §§ 353-374.

196 Watts v. Christie, 11 Beav. 546; International Bank v. Jones, 119 Ill. 407, 9 N. E. 885; Raymond v. Palmer, 41 La. Ann. 425, 6 South. 692, 17 Am. St. Rep. 398; Adams v. First Nat. Bank, 113 N. C. 332, 18 S. E. 513, 23 L. R. A. 111 (cf. Hodgin v. People's Nat. Bank, 125 N. C. 503, 34 S. E. 709); Owsley v. Bank of Cumberland (Ky.) 66 S. W. 33; Eyrich v. Capital State Bank, 67 Miss. 60, 6 South. 615. See "Banks and Banking," Dec. Dig. (Key No.) § 134; Cent. Dig. §§ 353-374.

197 Coote v. Bank of the United States, Fed. Cas. No. 3,204, 3 Cranch, C. C. 95. See "Banks and Banking," Dec. Dig. (Key No.) $ 134; Cent. Dig. §§ 353-374.

has been held that the bank may apply a deposit against the joint debt of the depositor and another.198

The bank may not, without the depositor's consent, apply a deposit against a note on which the depositor is an indorser, or a surety, or against a debt guaranteed by the depositor.199 But it may so apply the deposit if the principal debtor is insolvent. 200

Right of Surety to Have Deposit Applied

A bank is not required, without a demand by the depositor, to apply a deposit on account of his debt.201 Whether one who holds the position of a surety of a debt of the depositor to the bank, as the indorser of a note held by it, has a right to have the deposit applied to payment of the debt, and consequently is discharged if the bank fails to make such application when it holds a sufficient deposit to pay the debt and permits the deposit to be checked out, is a question as to which the authorities are divided. On the one hand, it is said that the right of the bank to apply a deposit to the satisfaction of the depositor's debt is not a lien, or a right in the nature of a lien, but is in the nature of a set-off or application of payments, neither of which, in the absence of agreement or express appropriation, will be required by the law to be so made

198 Hayden v. Alton Nat. Bank, 29 Ill. App. 458. But see, Dawson v. Real-Estate Bank, 5 Ark. 283. Merchants' & Mechanics' Bank of Wheeling v. Evans, 9 W. Va. 373. See "Banks and Banking," Dec. Dig. (Key No.) § 134; Cent. Dig. §§ 353-374.

199 Harrison v. Harrison, 118 Ind. 179, 20 N. E. 746, 4 L. R. A. 111; O'Grady v. Stotts City Bank, 106 Mo. App. 366, 80 S. W. 696. See, also, New Farmers' Bank's Trustee v. Young, 100 Ky. 683, 39 S. W. 46. See "Banks and Banking," Dec. Dig. (Key No.) § 134; Cent. Dig. §§ 353–374.

200 Ex parte Howard Nat. Bank, Fed. Cas. No. 6,764, 2 Lowell, 487. See "Banks and Banking," Dec. Dig. (Key No.) § 134; Cent. Dig. 8 353-374.

201 Boothe v. Farmers' & Traders' Nat. Bank, 53 Or. 576, 98 Pac. 509; Guernsey v. Marks, 55 Or. 323, 106 Pac. 334; Bacon's Adm'r v. Bacon's Trustees, 94 Va. 686, 27 S. E. 576. See "Banks and Banking," Dec. Dig. (Key No.) § 134; Cent. Dig. §§ 353-374.

as to benefit a surety; and it is therefore held that the surety is not discharged by the bank's failure to apply the deposit. to the debt.202 On the other hand, it is said, with better reason, that the right of the bank, if not strictly a lien, nevertheless gives the bank the power to retain control of the deposit for the purpose of security, and that therefore, if the bank fails to apply the deposit, the surety is discharged by operation of the rule of suretyship that a creditor who parts with a security for a debt thereby discharges the surety.203 The bank is, of course, under no duty to apply the deposit in favor of one primarily liable, as the acceptor of a bill,204 or the maker of a note.205

202 National Mahaiwe Bank v. Peck, 127 Mass. 298, 34 Am. Rep. 368. See, also, Furber v. Dane, 203 Mass. 108, 89 N. E. 227; London & S. F. Bank v. Parrott, 125 Cal. 472, 58 Pac. 164, 73 Am. St. Rep. 64; Camp v. First Nat. Bank of Ocala, 44 Fla. 497, 33 South. 241, 103 Am. St. Rep. 173; Voss v. German-American Bank of Chicago, 83 Ill. 599, 25 Am. Rep. 415; Second Nat. Bank of Lafayette v. Hill, 76 Ind. 223, 40 Am. Rep. 239; Ticonic Bank v. Johnson, 21 Me. 426; National Bank of Newburgh v. Smith, 66 N. Y. 271, 23 Am. Rep. 48; Webb v. Smith, 30 Ch. D. 192. See "Banks and Banking," Dec. Dig. (Key No.) § 134; Cent. Dig. §§ 353-374.

203 Pursifull v. Pineville Banking Co., 97 Ky. 154, 30 S. W. 203, 53 Am. St. Rep. 409. See, also, Bank of Taylorsville v. Hardesty (Ky.) 91 S. W. 729; Dawson v. Real-Estate Bank, 5 Ark. 283; McDowell v. President, etc., of Bank of Wilmington & Brandywine, 1 Har. (Del.) 369; Commercial Nat. Bank v. Henninger, 105 Pa. 496.

The deposit must be sufficient at the time of maturity of the debt. Subsequent deposits will not raise the duty. People's Bank of Wilkes-Barre v. Legrand, 103 Pa. 309, 49 Am. Rep. 126; First Nat. Bank v. Shreiner, 110 Pa. 188, 20 Atl. 718; First Nat. Bank of Lock Haven v. Peltz, 176 Pa. 513, 35 Atl. 218, 36 L. R. A. 832, 53 Am. St. Rep. 686. See "Banks and Banking," Dec. Dig. (Key No.) § 134; Cent. Dig. §§ 353-374.

204 Flournoy v. First Nat. Bank, 79 Ga. 810, 2 S. E. 547; Citi

205 Mechanics' & Traders' Bank v. Seitz, 150 Pa. 632, 24 Atl. 356, 30 Am. St. Rep. 853; Id., 155 Pa. 191, 26 Atl. 209. See "Banks and Banking," Dec. Dig. (Key No.) § 134; Cent. Dig. §§ 353-374.

SET OFF BY DEPOSITOR

22. A depositor has the right to set off a general deposit against his matured debt to the bank; and upon

the insolvency of the bank he may exercise this right, even if the debt is not matured.

A depositor may at any time require the bank to apply a deposit to the payment of his debt; 206 and in an action by the bank on his note, or for money otherwise due, he may set off his deposit against the demand.207 This right of set-off is usually exercised when the bank is insolvent, and the depositor is called upon to pay his debt to it, and in such case he is entitled by way of set-off to the full amount of his deposit, and is not compelled to pay his debt, less such dividend as may be payable to the other general creditors. The right may therefore be exercised as against a receiver or other representative of the insolvent or bankrupt bank.208 Such allowance is not a preference forbidden by the national bank

zens' Bank of Steubenville v. Carson, 32 Mo. 191. Cf. Armstrong v. Warner, 49 Ohio St. 376, 31 N. E. 877, 17 L. R. A. 466; Van Winkle Gin & Machinery Co. v. Citizens' Bank of Buffalo, 89 Tex. 147, 33 S. W. 862. Sec "Banks and Banking," Dec. Dig. (Key No.) § 134; Cent. Dig. §§ 353–374.

206 Laubach v. Leibert, 87 Pa. 55. See "Banks and Banking,” Dec. Dig. (Key No.) § 135; Cent. Dig. §§ 375-379.

207 Equitable Bank v. Claassen, 3 Misc. Rep. 148, 23 N. Y. Supp. 310. See, also, Becker v. Seymour, 71 Minn. 394, 73 N. W. 1096. See "Banks and Banking," Dec. Dig. (Key No.) § 135; Cent. Dig. §§ 375-379.

208 Fisher v. Hanover Nat. Bank, 64 Fed. 832, 12 C. C. A. 430; State v. Brobston, 94 Ga. 95, 21 S. E. 146, 47 Am. St. Rep. 138; Bernstein v. Coburn, 49 Neb. 734, 68 N. W. 1021; Second Nat. Bank of Cincinnati v. Hemingray, 34 Ohio St. 381; Miller v. Receiver of Franklin Bank, 1 Paige (N. Y.) 444; Skiles v. Houston, 110 Pa. 254, 2 Atl. 30 (administrator of insolvent banker); post, p. 423. See "Banks and Banking," Dec. Dig. (Key No.) § 135; Cent. Dig. §§ 375-379.

acts.209 If the bank is insolvent, the depositor may exercise his right even against a debt that did not mature until after the insolvency.210 He may exercise it as against a debt on which he is a surety, as a note on which he is an indorser.211 A deposit is not available as a set-off, however, if it has been assigned to a debtor for that purpose after the bank's insolvency,212

209 Scott v. Armstrong, 146 U. S. 499, 13 Sup. Ct. 148, 36 L. Ed. 1059; Mercer v. Dyer, 15 Mont. 317, 39 Pac. 314. See "Banks and Banking," Dec. Dig. (Key. No.) §§ 135, 287; Cent. Dig. §§ 375379, 1122.

210 Scott v. Armstrong, 146 U. S. 499, 13 Sup. Ct. 148, 36 L. Ed. 1059; Steelman v. Atchley (Ark.) 135 S. W. 902, 32 L. R. A. (N. S.) 1060; Yardley v. Clothier (C. C.) 49 Fed. 337; McCagg v. Woodman, 28 Ill. 84; Colton v. Drovers' Perpetual Building & Loan Ass'n, 90 Md. 85, 45 Atl. 23, 46 L. R. A. 388, 78 Am. St. Rep. 431; Thompson v. Union Trust Co., 130 Mich. 508, 90 N. W. 294, 97 Am. St. Rep. 494; Clute v. Warner, 8 App. Div. 40, 40 N. Y. Supp. 392; Jack v. Klepser, 196 Pa. 187, 46 Atl. 479, 79 Am. St. Rep. 699; Jones v. Piening, 85 Wis. 264, 55 N. W. 413.

The right of a depositor to set off, without demand, a deposit on open account, or one the certificate of which has not matured, arises, in the absence of fraud, only in case of the declared insolvency of the bank. Stadler v. First Nat. Bank, 22 Mont. 190, 56 Pac. 111, 74 Am. St. Rep. 582. See "Banks and Banking," Dec. Dig. (Key. No.) § 135; Cent. Dig. §§ 375-379.

211 Yardley v. Clothier (C. C.) 49 Fed. 337; Kilby v. First Nat. Bank, 32 Misc. Rep. 370, 66 N. Y. Supp. 579; Davis v. Industrial Mfg. Co., 114 N. C. 321, 19 S. E. 371, 23 L. R. A. 322; Arnold v. Niess, 1 Walk. (Pa.) 115. But not if the maker is solvent. New Farmers' Bank's Trustee v. Young, 100 Ky. 683, 39 S. W. 46; Borough Bank of Brooklyn v. Mulqueen, 70 Misc. Rep. 137, 125 N. Y. Supp. 1034. See "Banks and Banking," Dec. Dig. (Key No.) § 135; Cent. Dig. §§ 375-379.

212 In re Shults (D. C.) 132 Fed. 573; Ingwersen v. Buchholz, 88 Ill. App. 73; Stone v. Dodge, 96 Mich. 514, 56 N. W. 75, 21 L. R. A. 280 (under statute). See Oyster v. Short, 177 Pa. 589, 35 Atl. 686. Cf. Johnston v. Humphrey, 91 Wis. 76, 64 N. W. 317, 51 Am. St. Rep. 873. See "Banks and Banking," Dec. Dig. (Key No.) § 135; Cent. Dig. §§ 375-379; "Bankruptcy," Dec. Dig. (Key No.) §§ 154, 159.

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